NAB prepared to bide its time with strategic AMP holding

National Australia Bank's overtures to AMP last night turned openly hostile after the bank criticised the beleaguered insurance group's demerger plan and played down its interest in an imminent takeover.

In his first public statement since AMP released its demerger documents last month, NAB chief executive Frank Cicutto said the bank was prepared to hold its strategic stake in AMP "for some time".

Although this may be interpreted as an attempt by NAB to deflate the AMP share price - which soared after NAB's botched share market raid in August netted it just 2 per cent - Mr Cicutto said the demerger did not deliver a "clean separation" from AMP's capital-hungry UK operations.

This was because AMP would continue to hold 15 per cent of HHG, the demerged British operations.

NAB, which will come under pressure over its plans at its annual results announcement on Tuesday, always supported a "clean demerger", he said.

Wilson HTM analyst Brett Le Mesurier said given the ongoing capital issues AMP faced in the UK post-demerger, NAB's comments could be interpreted as a reluctance to bid for AMP for at least another year.

Mr Cicutto said: "This demerger proposal is different from the one announced by AMP in May. In our view, there is no clear justification for a demerger which retains significant linkages between its Australian and UK businesses."

However, Mr Cicutto conceded the bank would still vote for the demerger on December 9, albeit "reluctantly" and would participate in the $1.2 billion rights offer which opened yesterday.

AMP hit back last night, arguing that it had spoken to most institutions and there was "strong support" for the demerger. "We are pleased NAB is also supportive," a spokeswoman said.

NAB has previously indicated it will only bid for AMP once it has dumped its UK operations. AMP shares closed 2c higher at $6.60 but may come under pressure on Monday if investors believed a takeover was no certainty.

Mr Cicutto's comments were well-timed, coinciding with the release of the delayed half-year accounts of AMP's British operations, which showed a seriously depleted balance sheet and ongoing losses.

The accounts showed HHG, incorporating funds management arm Henderson and life funds Pearl, National Provident and London Life, had £155 million ($365.6 million) in net assets as at June 30, 2003, above total liabilities of £32.5 billion. But included among the assets were £288 million of intangibles, indicating a deficiency in the balance sheet if items such as remaining goodwill, were subtracted.

AMP has played down the prospect of HHG requiring extra capital on top of that announced once it is demerged, though the calculation of regulatory capital includes a number of assets that may in future be regarded as inadmissable. The difficult state of the business has seen it jokingly labelled internally as the "fat boy in the canoe" alongside the relatively well-performing Australian operations.